Credit score:

The best home loan rates are typically offered to people with credit scores over 740, according to Fannie Mae. However, some loan programs have lower credit score requirements.

Occupancy type:

Occupancy type refers to what you’re using the home for — a primary residence, a second home or an investment property. Rates are the lowest for a home you plan to live in as your primary residence, because investors find most homeowners take extra measures to stay current on a mortgage tied to the roof over their head. If hard financial times hit, a second home or investment property mortgage may not be a high priority, and lenders charge a higher rate because of that risk.

Property type:

Multi-unit properties and manufactured homes come with higher interest rates than single-family homes because lenders consider them riskier. For example, the payment on a multi-unit property might become hard to make if tenants suddenly move out. Meanwhile, lenders tend to view manufactured homes as a bigger risk than site-built homes because they don’t meet the same stringent property standards. 

Loan type:

Home loan rates also depend on the type of loan you choose. While some shorter-term loans come with lower interest rates because you’re repaying the loan off more quickly, you must be able to afford the higher monthly payments. 

A fixed-rate mortgage offers a stable monthly payment for the life of the loan. While 30-year mortgage rates offer the lowest monthly payment, you’ll pay more in total interest over the life of the loan. That’s compared to a shorter, fixed-rate term, such as a 15-year fixed mortgage, that features a lower rate but higher monthly payment.

The rate on an ARM is lower for a temporary period of 1 month to 10 years, but can go up or down once the initial fixed-rate period ends. An ARM is a good option for people who plan to move before the payment adjusts.

Down payment:

Lenders also consider how much you are borrowing compared to your home’s value, a calculation known as “loan-to-value ratio” (LTV). The less you put down, the more risk lenders face if you default, so they charge a higher interest rate to mitigate potential losses. Below is the standard minimum down payment for the most common loan programs.

1. Conventional mortgages: Conventional mortgages are not backed by any government agency, but are purchased by government-sponsored enterprises Fannie Mae and Freddie Mac. They’re a good choice if you have high credit scores and a stable income.
2. FHA mortgages: Approved lenders offer FHA mortgages backed by the Federal Housing Administration (FHA) with the best rates for credit scores down to 580, and easier qualifying guidelines than conventional loans. Government rates tend to be lower than conventional rates, although you need mortgage insurance regardless of your down payment. As a result, you could have a higher payment despite getting a lower rate.
3. VA loans: The Department of Veterans Affairs (VA) guarantees VA loans for active duty and veteran military borrowers, and eligible spouses. There is no minimum credit score requirement, although most lenders will require at least a 620 score. VA rates tend to be lower than conventional rates.
4. USDA loans: The U.S. Department of Agriculture (USDA) offers mortgage financing for low- to moderate-income borrowers with no money down to purchase homes in eligible areas. USDA-approved lenders require a minimum credit score of 640.
5. Jumbo mortgages: If you need to borrow more than the conforming loan limit of $484,350 for most single-family homes in the U.S., a jumbo loan may be the best option. Depending on the lender, jumbo rates can be lower than conventional conforming rates. That’s primarily because approval guidelines are more stringent, with more documentation requirements and higher average credit scores that make the loans less risky for investors.

Know the programs you qualify for

Government loan programs are the best option if you’ve got bumps in your credit history, or don’t have enough money for a down payment. Jumbo and conventional loans are the best choices if you’ve got stellar credit and a solid income history.

Get rate quotes the same day

If you’re serious about shopping for the best mortgage, get all of your rate quotes on the same day. Rates change daily, so comparing quotes on the same day will give you the most up-to-date information to compare. Use a rate comparison tool to make it easier — you’ll have access to multiple lenders within minutes of entering your information.

Compare lender fees on your loan estimates

Look closely at the lender fees, such as origination, discount fee, credit report and appraisal fee, when you’re comparing loan costs. If there are fees you don’t understand or seem unusually high compared to other lenders, try to negotiate them.

Consider factors besides the interest rate

The best home loan may not be the one with the lowest rate. A faster closing or a smoother transaction with a loan officer or mortgage broker who walks you through the process might be more important to you than pricing.

Get your lock confirmation in writing

Once you find the rate and loan officer you’re comfortable with, ask for a written mortgage rate lock confirmation. Most lenders will automatically send you a loan estimate confirming your lock by email, but be sure to request it in writing if you haven’t received confirmation within a day or two of your lock request.